Career

Organizational Confidence: The Key to Building a High-Commitment Work Environment

27 May, 2018
  • Lewis Garrad

    Employee Engagement Segement Leader, Growth Markets at Mercer

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“Employees are most committed to their organization when they believe in the business and operate in a high-commitment work environment”

Employees are most committed to their organization when they believe in the business and operate in a high-commitment work environment—one where employees are not only engaged in their work, but also committed to making the organization better.

For decades, organizational leaders, HR professionals and industrial-organizational psychologists have searched for ways to create high-commitment work environments. Considering the expense and disruption associated with turnover, this makes good sense. One recent study found that turnover costs (e.g., separation costs, replacement costs) range from 90 to 200 percent of the exiting employee’s salary[1]. When turnover increases, the social fabric of an organization weakens[2], intangible knowledge and skills are lost[3], operational effectiveness decreases[4], accidents rates rise[5], customer service and quality suffer[6], and customer satisfaction declines7. All of which can negatively impact a company’s financial performance[8].

To increase commitment, many organizations are now trying to build employee-centric work environments. These organizations are spending considerable amount of time, energy and resources identifying employee motivators, assessing employee engagement and enhancing the employee experience. For example, some organizations are using “stay interviews” to help managers ensure they are meeting the critical needs of their direct reports. Others are conducting job-crafting exercises to help employees make their jobs more personally meaningful and satisfying.

Based on our experience, these types of interventions can be effective and increase commitment levels. But we’ve found their impact tends to be short-lived, often leading to temporary fixes and local improvements rather than broad organizational change. In fact, engagement building activities can backfire if employees have foundational questions and concerns about the business. When strategies are unclear, work processes are inefficient, performance goals are unclear, and products and services no longer meet the needs of clients and customers, employees become frustrated. As one employee recently stated: “I love this company, but I don’t like the direction we’re headed in. We spend too much time on nonsense. 

We’re getting away from what we are supposed to do, which is meeting clients and selling.” When faced with organizational frustrations, some engaged employees leave to seek better opportunities elsewhere. In the recent Mercer-Sirota Engagement study, we found that over a quarter of employees who quit were in fact engaged.

So if engagement does not guarantee retention, what’s the best way to build a high-commitment organization? New research indicates that individual commitment may be more related to business performance than employee experience. In recent years, researchers have started exploring the relationship between organizational efficacy—the extent to which organizational members feel confident about their collective capabilities, mission and business resilience—and employee commitment and performance. The concept of organizational efficacy can be traced back to the seminal work of Albert Bandura, who argued that the strength of families, communities and social institutions depends, in part, on members’ sense of their collective efficacy—their ability to solve problems and manage challenges together. Building on this initial theory, other researchers have focused on efficacy in organizational settings and found that it is related to a number of important work outcomes. For example, Capone and colleaguesi (2013) found that organizational efficacy has a positive impact on employee job satisfaction, well-being and performance. And Zellars and colleagues (2001)ii found that healthcare workers with a high degree of collective efficacy were more satisfied with their jobs and less likely to quit.

Informed by this research, we recently explored the relationship between an employee’s level of confidence in their organization with their commitment and engagement. After gathering data from a cross-company sample of more than 1,700 employees working in small, medium and large organizations, we conducted a series of analyses. Three key findings emerged:

1. Organizational confidence is related to employee commitment.
 

Across a number of diagnostic items, we found significant positive correlations between employee confidence and employee commitment. Employees were more likely to want to stay at their organizations when they felt they were working in a well-run organization with the right products and services for their market. But when employees did not feel confident in the future of their organization, commitment levels dropped precipitously. In fact, over 40 percent of respondents who felt unconfident in the future of their organization intended to leave within the year.

2. Organizational confidence soars in the right work environment
 

Based on statistical analysis, we found four foundational drivers of organizational confidence. First is clear communication. Employees were more likely to feel confident when they understood their company’s goals and felt their organization communicated effectively. Second is a sense of collaboration. When employees experienced a high degree of cross functional teamwork, they were more likely to feel positive about the future. Third is organizational agility. Employees who felt they were working in nimble organizations that encouraged innovation and responded quickly to customer needs were more likely to be optimistic about the future. And finally, effective leadership is paramount. When employees trusted their senior leaders were making sound decisions, they were more likely to feel a sense of organizational efficacy.

3. The most committed employees are both confident and engaged.
 

In addition to finding that confident employees were less likely to want to leave their organizations, we also found that engagement is a strong predictor of employee commitment. In fact, we found that employees were least likely to want to leave when they felt both confident in their organization and engaged with their work.

We also found a strong positive correlation between engagement and confidence, suggesting that these two attitudes build on each other in a virtuous cycle, creating a strong sense of energy, effort and loyalty. Statistical analysis showed employees were more likely to feel both confident and engaged when they thought their organizations were efficient, their senior leaders were effective, and their future career paths were promising.

Considered together, our analyses show that organizational confidence is a critical factor that impacts employee commitment. For leaders and managers seeking to create a high-commitment work environment, this raises an important question: What’s the best way to increase organizational confidence? Based on our research, we recommend four steps.

  1. 1. Forecast the future.
    These are volatile times in many companies. Amidst competing commitments and shifting priorities, we’re finding that a number of employees feel lost in the shuffle. According to our latest Mercer-Sirota Normative database, just 69 percent of employees report feeling that their senior leaders provide a clear sense of direction. As we found in our recent field study, a lack of strategic clarity undermines confidence. It’s hard for employees to feel optimistic about the future when they don’t know where their organization is headed. If your organization has been going through a lot of changes in recent years, now could be a good time to evaluate the extent to which your workforce understands and supports your strategic direction.

  2. 2. Create a culture of curiosity, creativity and collaboration.
    Culture is the invisible infrastructure of an organization, shaping the way people think, feel and behave on a daily basis. Based on our research, we’ve found that employees thrive when they work in a “partnership culture” in which people work together in highly collaborative relationships. Confidence flourishes in an environment where employees feel safe to take smart risks, pursue novel ideas and question the status quo. But here’s the problem:

    Partnership cultures require the right kind of leadership. We’ve seen leaders and managers kill creativity and collaboration by building silos, fixating on short-term financials and micromanaging their staff. So if you want to build a collaborative culture, start at the top.

  3. 3. Remove performance barriers.
    Based on our research, we’ve found that most employees are highly motivated when they first join a new organization. But that initial energy often dissipates when employees have to work in environments with excessive rules and regulations, unnecessary bureaucracy and outdated tools and technology. The more hindrances employees encounter at work, the more likely they are to become frustrated, disengaged and even burned out. If you want to build a high-commitment work environment, identify and remove the performance barriers that prevent your employees from doing their best work on a regular basis.

  4. 4. Clarify career paths.
    Our study found that the most committed employees felt optimistic about both the future of their organization and the future of their career. Across clients and research projects, we’ve found that employees who feel they can grow and develop at work are more likely to work hard, stay longer and perform better. But based on our norms, only 57 percent of employees have a clear understanding of the possible career paths within their organization; the rest feel confused or pessimistic. One of the best ways to counter this confusion is to create compelling career frameworks that help employees see how they can develop within your company. We’ve found that well-designed career frameworks can dramatically impact the way employees think about the future of their jobs and their organizations.
     

At the core of these recommendations is a simple premise: You can increase employee confidence by ensuring your leaders, managers and HR professionals are articulating a compelling vision of the future, fostering the right culture, driving performance and creating compelling career paths.

That, in turn, will help your organization increase commitment, decrease turnover and improve collective performance.

 

1 Allen, Bryant, & Vardaman, 2010
2 e.g., Batt & Colvin, 2011
3 Nyberg & Ployhart, 2013
4 e.g., Ton & Huckman, 2008
5 e.g., Shaw, Gupta, & Delery, 2005
6 e.g., Hancock, Allen, Bosco, McDaniel, & Pierce, 2013
7 Heavey, Holwerda, & Hausknecht, 2013
8 e.g., Park & Shaw, 2013; Shaw et al., 2005

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If you are about to launch a pulse program, you are in a unique position to help your organization explore its most pressing people problems, performance challenges and strategic priorities. But pulses are not a panacea. Without a clear plan in place, they can backfire — producing more noise than signal. The best employee research programs are carefully designed from start to finish. By clarifying your business priorities, developing a clear research agenda and thinking deeply about instrument design, survey administration, results reporting and post-study actioning, you can ensure that your research efforts are relevant, rigorous and have a real impact on the way your organization operates. The best way to do that, we’ve found, is to think through each step of the process. The five questions presented in this paper can help you get started. Before conducting your next pulse, we recommend giving careful consideration to each. If you don’t have clear answers, you may not be ready to conduct a successful study. Download POV

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